
ACCT326 ch15 flashcard #1
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Business
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University
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Practice Problem
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Hard
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1.
FLASHCARD QUESTION
Front
Finance leases are agreements that are formulated outwardly as leases, but which in reality are essentially similar to installment purchases.
Back
True
2.
FLASHCARD QUESTION
Front
From the perspective of the lessee, leases may be classified as either: Finance or operating.
Back
Finance or operating.
3.
FLASHCARD QUESTION
Front
From the perspective of the lessor, two possible lease classifications are: Operating or sales-type.
Back
Operating or sales-type.
4.
FLASHCARD QUESTION
Front
What type of lease is Minnetonka Company leasing an asset with the following details?
Fair value of the asset: $400,000.
Useful life of the asset: 6 years with no salvage value.
Lease term is 5 years.
Annual lease payments are $60,000.
Implicit interest rate: 11%.
Minnetonka can purchase the asset at the end of the lease period for $50,000.
Back
Finance
5.
FLASHCARD QUESTION
Front
The five criteria provided in GAAP for distinguishing a finance lease from an operating lease do not include which of the following?
- The agreement specifies that ownership transfers at the end of the lease term.
- The collectibility of the lease payments must be reasonably predictable.
- The agreement grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
- The noncancelable lease term is for the major part of the remaining economic life of the underlying asset.
Back
The collectibility of the lease payments must be reasonably predictable.
6.
FLASHCARD QUESTION
Front
One of the five criteria for a finance lease specifies that the lease term be equal to or greater than:
Back
the major part of the remaining economic life of the leased property.
7.
FLASHCARD QUESTION
Front
One of the five criteria for a finance lease specifies that the present value of the lease payments be equal to or greater than:
Back
substantially all of the fair value of the asset.
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